Group seeks to build Alaska gas pipeline

Murkowski expected to announce today another contender for building pipeline

Posted: Friday, January 23, 2004

By MASHA HERBSTJUNEAU EMPIRE

A group of gas pipeline operating companies and Alaska Native corporations has applied to the state to build a natural gas pipeline that would bring Alaska's known 35 trillion cubic feet of natural gas reserves from Prudhoe Bay to the Lower 48, Gov. Frank Murkowski announced Thursday afternoon.

The proposal calls for a 745-mile, $6.3 billion pipeline extending from Prudhoe Bay to the Alaska-Yukon Territory border near Beaver Creek. There, the pipeline would hook up with a new Canadian pipeline, possibly built by pipeline and power company TransCanada.

The application was submitted by MidAmerican Energy Holding Co., Pacific Star Energy and Cook Inlet Regional Inc., among others. MidAmerican is a privately-held company whose major owners are billionaire investor Warren Buffett and his holding company, Omaha, Neb.-based Berkshire Hathaway.

Pacific Star Energy is a consortium including 12 Native corporations.

"The administration will negotiate a draft contract with the MidAmerican group, and the draft will be submitted to the Legislature for approval," Murkowski said. "In addition, my administration and I personally will engage at the national level with the Congress, White House and fellow governors from gas-consuming states to garner the support needed to market Alaska natural gas."

Conoco Phillips spokeswoman Dawn Patience said Conoco Phillips, BP and ExxonMobil submitted a separate application Jan. 13 to build a pipeline. She said a Murkowski press conference scheduled for this afternoon would deal with that application, but declined to release specifics.

"I can tell you that Conoco Phillips has been an advocate of the southern route," Patience said.

The southern route would run parallel to the trans-Alaska oil pipeline from Prudhoe Bay to Fairbanks, veering off to follow the Alaska Highway through Alberta, and ending in Chicago.

Murkowski did not mention the Conoco Phillips-BP-ExxonMobil application during his announcement Thursday, but said he anticipates receiving other applications for construction of a pipeline and that each will receive equal consideration. The Legislature must approve any draft contract.

Murkowski also said he thought the proposal could assist the Alaska Natural Gas Development Authority in its proposal to build a pipeline from Prudhoe Bay to Valdez, because the two projects could share costs.

MidAmerican chairman and CEO David Sokol said the pipeline will be "open access," allowing any interested producers use of the facility. He said he hopes to obtain legislative approval by the end of the regular session in mid-May, with construction beginning in early 2006 or late 2007, and operation beginning in 2010.

He said financial incentives contained in the federal energy bill remain vital to the project's completion. The energy bill includes a loan guarantee that would kick in if the project is not completed, accelerated depreciation for the pipeline for tax purposes, and a tax credit for the cost of a natural gas conditioning plant on the North Slope to prepare gas for shipment.

"The energy bill for a lot of reasons may or may not happen. We'll have to move some of those pieces into other legislation," Sokol said. "The federal government understands the importance of this pipeline not only to Alaska but to the Lower 48."

He also said the company is committed to using Alaska labor.

Ken Thompson, president and CEO of Pacific Star Energy, said he was excited at the prospect of Alaska companies owning part of the pipeline. He said the company is assessing possibilities for pipeline spurs into Anchorage, Fairbanks and Valdez.

Though the mood at the Fairbanks Princess Hotel, where Murkowski made his announcement, was celebratory, the governor offered a word of caution.

"There are still many obstacles to overcome, and I caution everyone to temper their optimism with a full recognition of the challenges this project still faces," he said.